India - co-working operators moving in as anchor tenants

3 MIN READDecember 21, 2018
GRI Club India reconvened in Bangalore, on 13th December 2018 to discuss ‘space-as-a-service’, a club meeting hosted over a fine, wine tasting session at the spectacular CoWrks office. The group focused on co-working spaces that is transforming the face of commercial real estate at a rapid pace.

Market convergence and consolidation

Club members considered how the commercial real estate market has been changing, with developers and operators moving from being just rent collectors to becoming service providers. Plenty of consolidation was predicted across the next four to five years: developers have been partnering with co-working companies and, in some cases, co-working firms have turned into developers and landlords themselves. It was expected by the attendees that co-working operators would compete with developers, using tech, data and unique business models to provide differentiated service offerings, and that if owners or developers did not respond quickly enough, it would threaten their existing business structure.

Several corporations were mentioned that are partnering with co-working firms, as well as large investors that are investing in similar companies and ensuring that co-working space forms part of their overall service offering. For those investors looking to diversify portfolios, and for those office developers looking to source yield-generating assets, it was noted that co-working is asset-light and brings in returns of up to 7%.

The co-working business model

The co-working business model was discussed in greater detail - for example, how it provides clients with greater flexibility in terms of both floor space and tenure, how it enables client companies to focus on their core competencies, and how the model’s success is based on economies resulting from shared space. It was noted that, for a big corporation, working from a co-working space could turn out to be 50%-60% cheaper than having its own office, because, even if per-seat costs were higher, overall costs would remain lower as space usage was flexible. Given the large number of co-working operators in the market, it was observed that they had to differentiate themselves, and various ways were discussed. 

Unique features and trends

Co-working was seen as providing a youthful and positive vibe, situated as an ideal third space between work and home, where the employee, not the company, was the real client. The discussion took in the trends and technologies that are driving the co-working industry, from smartphones to lifestyle preferences, and why some traditional tenants are now seeking co-working spaces at least for a fraction of their workforce, if not all. 

Limitations and opportunities

A big concern shared by the group was data privacy in co-working spaces: some firms do not want their employees to talk to other people; some may also want their servers to be seperate. In such cases, it was pointed out, a few ‘managed spaces’ could offer separate servers and systems to large, long-term tenants.

In conclusion, it was noted that, while the discussion had focused primarily on the millennial generation, when it came to co-working and ‘space-as-a-service’, similar questions had to be asked with respect to other generations.
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